Since the first Occupy protests a year ago, the debate over inequality has largely focused on ways to rectify the capture of money and political power by the 1 percent. It's an urgently needed discussion, given the spectacle of bank bailouts, sky-rocketing CEO pay and blatant malfeasance by Wall Street and Congress. But much less attention has been given to the flip side of inequality, namely the collapse of the labor market for the 99 percent.
The root of the problem is America's good jobs deficit, which has been building for three decades and has only worsened as low-wage jobs like retail, food preparation and home health care dominate the recovery. Compounding the trend is the stalling of upward mobility, the persistence of race and gender inequality, and the emergence of wage theft as routine business practice. Some of this has been driven by globalization, but a lot has taken place in domestic industries where employers are increasingly focused on cutting labor costs, Gaining flexibility with contingent and subcontracted work, and maximizing shareholder value - all facilitated by the withdrawal of government's hand in the labor market.
To fight inequality, that hand must become visible again. The days when business hewed to a social contract are long gone, and unions, struggling just to maintain their share of the work force, cannot deliver strong labor standards on their own. Community and immigrant worker organizing has surged in recent years, but not yet with enough heft to significantly drive job quality.
As a country, what we need is more scale and power to raise standards in the labor market, and government has both. This is not to sideline the vital importance of tax and health care reform, mortgage relief and quality education - but those policies won't be enough to rectify the multiple inequalities that have been building for decades. In the deregulated, gloves-off economy that the U.S. has become, we have to directly take on the profound redistribution of wages that has occurred within the workplace itself. To be clear, a renewed commitment to labor market regulation does not mean onerous anti-business meddling. It just means a basic focus on strengthening, enforcing, and updating the core job standards that all Americans agree on: decent pay, safe workplaces, equal access to good jobs, and the idea the taxpayer money shouldn't be used to create poverty wages. These are basic principles of fairness, and here are three ways government can help restore them.
(1) Raising the Floor of Labor Standards
Many of the laws that set core standards in our labor market - the minimum wage, health and safety regulations, and the right to organize chief among them - have either stagnated or weakened over the past three decades.
At $7.25 an hour (or $15,000 a year), the federal minimum wage is a poverty wage - and it's even lower for tipped workers, stuck at an abysmal $2.13 an hour. In workplace health and safety, outdated standards (for hazards like silica) and lagging regulation (for emerging hazards like infectious diseases) result in millions of occupational injuries and illnesses every year that can and should be prevented. The increasing failure of the National Labor Relations Act to protect the right to organize has resulted in an enormous representation gap (58 percent of U.S. workers say they would like to be represented by a union, but only 11.8 percent actually are). Nearly 40 million Americans are working without a single paid sick day, forcing them to risk their paycheck or their health (and the public's) every time they or their children get the flu.
At the same time, key occupations are excluded from legal protection altogether. Roughly 2.5 million home care workers are exempted from federal minimum wage and overtime coverage, leaving many immigrants and women of color in poverty. Legions of subcontracted workers, independent contractors, day laborers and other contingent workers are stuck in ambiguous legal status in some of the worst working conditions.
The good news is that the fixes to many of these problems are straightforward and supported by the public. Proposed bills in Congress would raise the federal minimum wage to $9.80 by 2014, index it to inflation (as ten states already do) so that its value doesn't erode every year, and also raise the tipped worker wage. There is legislation to make paid sick days a national standard, and agendas for overhauling the NLRA and OSHA are in development. The U.S. Department of Labor has proposed regulatory action to end the exemption of home care workers, and at the state level, a Domestic Worker Bill of Rights was recently passed in New York State and is awaiting the Governor's signature in California.
More difficult will be updating our laws for the profound reorganization of the American workplace, and finding ways to hold employers responsible for the workplace standards that they control at arm's length. A good model is California's proposed law making firms liable for minimum wage and overtime violations by their subcontractors, recognizing that end-user firms such as Walmart exert considerable economic control over working conditions down their supply chains.
(2) Enforcing the Law
It's not enough just to have strong laws on the books. They also need to be enforced, and right now the U.S. enforcement and penalty regime is widely regarded as very weak. For example, the number of federal wage and hour inspectors is still below 1980 levels, even with recent hiring under the Obama administration. It would take 131 years for OSHA investigators to inspect each workplace under its jurisdiction just once, given current staffing levels.
Weak enforcement means that tens of millions of Americans are effectively on their own, without our protection, and the data show it. As one measure, a 2008 study of Chicago, Los Angeles and New York found that 26 percent of low-wage workers were paid less than the minimum wage, 76 percent were underpaid or not paid at all for their overtime hours, and 70 percent worked off the clock before or after their shift. Workers were robbed an average of $2,634, or 15 percent, of their annual earnings.
While enforcement agencies can certainly do smarter enforcement with the resources they have, ultimately we need more boots on the ground. At the same time, labor violation penalties are so low that there's little incentive to comply with them. Until employers face substantial costs to their bottom line (as is true in other bodies of law, such as environmental regulation), practices like wage theft, retaliation against workers trying to organize, and independent contractor misclassification will continue unabated.
(3) Government Paves the Way to Living wage Jobs
Finally, even with a robust floor of labor standards, we still need to create living wage jobs on top of that floor - and government can help here too.
The key insight here is that government's levers on the private sector are plentiful but underused. Federal agencies spend more than $500 billion annually on purchasing goods and services, and grant roughly the same amount to the states for schools, bridges, health care, and education. State and local governments spend an estimated $50 billion a year on direct subsidies, tax exemptions, and infrastructure improvements. And yet, a 2006 study found that 20 percent of all federal contract workers earned less than $10 an hour (a much higher percent than direct federal employees), meaning that public contracting is fueling substandard jobs, rather than creating good ones.
There are plenty of innovative state models to scale up to the federal level. States like California, Massachusetts, Connecticut, and Illinois have adopted "responsible contracting" policies that ask bidders for public contracts to provide data on their wages, benefits, and compliance records. More than 140 cities and counties and one state mandate living wages for businesses contracting with their governments. In Los Angeles, no major development project subsidized with taxpayer money goes forward without a living wage standard as a matter of city policy, and Pittsburgh and New York City have enshrined that principle in city law.
Equally important is that low-income communities and communities of color have access to the good jobs created by these policies. This has been a key focus of Community Benefits Agreement movement, which often includes targeted local hiring and training programs in its agreements with developers. Such programs should become standard practice in federally-funded infrastructure and green jobs projects. An oft-cited example is Portland's 2009 residential retrofitting program, which mandated living wages and local hiring from designated training programs. As of last year, the program's workers earned median wages of $18 per hour; fully 84 percent were local residents, nearly half of them people of color.
Targeted hiring and training programs are crucial to solving the escalating (and chronically under-reported) economic crisis in communities of color; in Milwaukee, for example, the employment rate for working-age black men dropped to 45 percent in 2010, the lowest ever recorded in the city.
A Realistic Plan for Living-Wage Jobs
Even in the best of times, it is difficult in the U.S. to leverage public policy - legislative, administrative, and regulatory - to improve wages and working conditions. The current trend line is actually in the opposite direction, with a coordinated strategy to roll back or eliminate collective bargaining rights at the state level, dismantle and undermine the minimum wage, and weaken or even repeal child labor protections. But there are reasons to think that a renewed commitment to strong labor standards is politically viable.
First, while the term regulation is anathema to Americans, many of the actual policies outlined above are popular with the public - not just the minimum wage, which consistently polls in the 70-80 percent range, but also policies such as community control over local development, increased funding for public goods such as elder and child care, using taxpayer money to create living wage jobs, and restoring the right to organize.
Second, even as unions continue to hemorrhage membership, alternative forms of organizing have been surprisingly robust. The living wage movement is the best known, growing from a single campaign in Baltimore in 1994 to the present, where the term itself has spread into the public lexicon. Immigrant worker centers have grown from a handful of organizations a decade ago to a nation-wide movement with close to 200 centers and five national networks. And in the economic development battlegrounds of our cities, communities of color have steadily laid down a track record of regional equity campaigns.
Until recently, all three movements have focused largely on winning reforms at the state and local level. And that work should continue: it would be significant progress if over the next five years, 30 states created infrastructure banks; 20 states passed stronger wage theft laws and raised and indexed their minimum wage; dozens of cities approved paid sick days ordinances; 15 states adopted clean energy standards creating demand for green jobs; and employers, unions, and workforce development agencies learned to implement targeted hiring and training programs for communities of color.
But ultimately, to fight inequality, we need the scale of federal resources, the breadth of federal standards, and the coordination that only a national living wage agenda can deliver. So the challenge is how to harness this pivotal moment - a public focused on income inequality, unions that still have political clout, a small but growing grassroots base - and translate it into the power needed to win strong and inclusive labor standards across the country. How we meet this challenge has enormously high stakes for the vital project of building a more equal, sustainable, and just America.
Annette Bernhardt, Ph.D., is policy co-director of the National Employment Law Project.